AbdulSamad Rabiu, Chairman of BUA Cement, has accused cement dealers of undermining the company’s effort to reduce cement prices to N3,500 per bag last year.
Speaking at BUA Cement’s 8th Annual General Meeting in Abuja on Thursday, Rabiu revealed that despite the company’s initiative, dealers sold cement to consumers at inflated prices, ranging from N7,000 to N8,000 per bag, nearly double the intended price.
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Rabiu stated, “A lot of the dealers took advantage of that policy. Rather than pass the low prices to the customers, they were selling at even double the price we sold to them.” He explained that the company had initially sold over a million tons of cement to dealers at N3,500 per bag, with the intention of benefiting end-users.
However, the policy was ultimately scrapped after it became clear that dealers were not passing on the lower prices. “We had sold more than a million tons at N3,500 before we realised what the dealers were doing,” Rabiu explained.
Rabiu also cited external economic factors as another reason for discontinuing the policy, including the devaluation of the Naira and the removal of the fuel subsidy. He noted that these factors made it difficult to maintain the price. “Because of the issues that Nigeria faced at the time, such as the devaluation of the Naira last year and the removal of fuel subsidy, we could not continue that policy,” Rabiu said.
“I’m referring to the point when the foreign exchange rate moved from about N600 to maybe N1,800 to the US Dollar. So, it became even more challenging and more difficult for us to actually sustain that price policy,” he added.
Despite these challenges, Rabiu emphasized that BUA Cement has been making efforts to stabilize prices, arguing that cement prices are relatively lower today than they could have been given the economic context. “If you see the exchange rate then, and the exchange rate today, you will see that cement is actually cheaper today than what it was last year,” he pointed out.
“The price of cement, if you take the N4,000 that it was in the beginning of last year, at N4,000 and today’s N6,000, it’s only a 50% increase,” he added.
Rabiu also highlighted the operational challenges faced by the company, particularly concerning energy costs, which are denominated in dollars. “Energy is the biggest cost. And our energy today is denominated in dollars. We buy gas to power our plants mainly, and gas is priced in dollars,” he explained.
He revealed that one of BUA’s plants now faces a monthly gas invoice of about N15 billion to N16 billion, up from N3 billion to N4 billion previously.
The financial report presented at the meeting illustrated the company’s challenges further. BUA Cement reported a revenue growth of 27.4%, rising to N460 billion in 2023, up from N361 billion in 2022, primarily due to its increasing market share.
However, the devaluation of the Naira in June 2023, continued depreciation, and rising inflation led to significant price pressures, resulting in a 39.5% increase in total costs, which climbed to N276 billion from N197.9 billion the previous year.
Despite these economic hurdles, BUA Cement managed to post a net profit after tax of N69.5 billion and declared a N2 dividend per share.
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